Regulators all around the globe have shown signs of intolerance regarding the development of privacy-enhanced cryptocurrencies, which are almost impossible to track. South Korean regulators are the latest to make a move in this regard, as the nation has announced plans to ban privacy coins from exchanges.
According to an announcement on November 3, South Korea’s Financial Services Commission (FSC) states that cryptocurrency exchanges operating in the nation will no longer be allowed to offer virtual currencies that pose high money laundering risks.
The amendments were made as a part of the Special Payment Act, a set of regulations dealing with the legality of digital currencies in South Korea.
The South Korean Financial Intelligence Unit has even termed it as “dark coins”, which are privacy-oriented cryptocurrencies, for having transaction records that are reportedly difficult for the group to trace. This could inversely affect the usage of popular coins like Zcash (ZEC), Monero (XMR), and Dash (DASH).
The changes to the Special Payment Act are expected to be enforced in March 2021. The bill urges crypto exchanges to implement strict Know Your Customer (KYC), and anti-money laundering (AML) policies. Furthermore, Exchanges must also report their operations within six months from the implementation of this law.
Besides de-listing privacy tokens from their respective platforms, exchanges are also required to confirm the real names of their customers by cross-checking the information provided by the user against personal identifications like national identity numbers.
Privacy coins at risk?
Many exchanges in South Korea already implement a no privacy coin policy due to international regulations in play.
Last year, crypto exchange OKEx’s South Korean subsidiary removed ZEC, XMR, DASH, Horizen (ZEN), and Super Bitcoin (SBTC) as a result of fresh guidelines set by the Financial Action Task Force. The guidelines required businesses to identify the two parties sending funds to each other if a transaction is worth more than around $1,000.
The same action was taken by South Korean crypto exchange Upbit during the same month, as it delisted Monero (XMR), DASH, ZCash (ZEC).
Meanwhile, regulators in the US have been taking a different approach as it looks they want to be able to track privacy-enhanced crypto coins rather than shunning them. The US Internal Revenue Services awarded a contract worth $625,000 to Chainalysis and Texas-based forensic data analysis firm Integra FEC, last month, to develop a pilot solution that will assist the IRS in tracing cryptocurrencies.